Association for Public Policy Analysis & Management

Economic growth research has identified that the majority of new jobs come from the expansion of existing firms, especially small businesses undertaking incremental and sustained expansion, as opposed to startups or large companies. While the global economy struggles to lift employment to its prerecession levels, strategies that provide concentrated, intensive assistance to these growth-oriented entrepreneurs could be in high demand. This paper uses small business data from cohort-based entrepreneurship programs in the U.S. aimed at expanding growth-oriented firms, to inform whether such strategies result in larger growth outcomes than more traditional on-demand business counseling services. It applies the lessons within the Global Entrepreneurship Monitor (GEM) business phase framework.

The intensive cohort-based programs are U.S. government-funded programs that offer over 40 hours of entrepreneurship education to cohorts of small businesses in a peer-based applied learning environment. The funder also supports more traditional, short intensity programs that provide on-demand advise and business counseling at the owner's request. The two types of programs are likely to attract businesses with differing characteristics and needs, and the owners are exposed to different frequencies and intensities of business assistance. However, given the cost and small target group of intensive services, it is important to ask whether these programs produce more significant growth outcomes than those achieved by businesses that obtain counseling as business issues arise. It is possible that, depending on the businesses’ needs, a few hours of the targeted counseling approach may be as impactful as the structured approach involving several hours of assistance.

The analysis uses data on employment growth from approximately 15,000 entrepreneurs participating in either type of program between 2014 and 2016. Propensity score matching is used to select businesses from the on-demand group that are comparable to businesses in the courses programming in terms of age, size, industry, location, and owner’s demographic characteristics. The business growth outcomes assessed include changes in employment and revenues. The Student’s T-test is used to detect statistically significant differences in the outcomes of the two groups. However, multivariate regression will also be used to measure differences and control for business characteristics if the propensity matching method cannot equalize the groups. The authors hypothesize that greater business growth occurs in intensive programs aimed at growth-oriented businesses. To apply the lessons within the business phase framework, the analysis also assesses the relationship between program type and outcomes at different age thresholds.

Based on descriptive statistics calculated during large-scale program evaluations already completed for each program type, the average participant in both programs grew over the observed period, but the rates of growth were higher in the intensive programs. The findings of the multivariate regressions will inform whether the relationship holds when taking into account the different types of businesses and owners that seek each type of service. The findings have implications for innovation-driven economies like the U.S., but also in such countries as Burkina Faso, Colombia and other efficiency- and factor-drive economies that (according to a recent GEM survey) have higher rates of growth-oriented entrepreneurs than the U.S.